Asset Manager Capitalism and the Energy Industry

This chapter explores this story. As the shale revolution picked up in the early 2010s, depressing oil revenues and profitability for U.S. energy companies, shareholder activist hedge fundsactivist hedge funds took advantage of the resulting shareholder discontent and mounted successful campaigns against energy companies to scrap longer term investments in their businesses and to do everything within their power to juice short-term returns through asset divestitures, share repurchases and dividends. Energy companies also came to face pressure from ESGESG activists and their supporters within the asset management industry to generally re-orient their businesses away from oil and gas in an attempt to combat climate changeclimate change. While proponents of ESGESG have often talked about the potential benefits of renewable and clean energy alternatives, institutional investor advocacy on climate changeclimate change has in practice had a negative orientation that is almost exclusively fixated on pushing energy companies to scale back emission-producing activities. By focusing their attention on large public corporations, ESGESG activism has had the effect of encouraging those companies to divest their dirty assets to less scrupulous private actors, enabling the divesting firms to cut their individual emissions, but not necessarily altering overall emission levels. The aggregate impact is that ESGESG activists have fallen short in achieving their overarching environmental goals, and functioned—hand in hand with traditional activist hedge fundsactivist hedge funds—to foster short-termismshort-termism and underinvestment in the energy industryenergy industry.